The Predictions Episode

Details #

Karl Siebrecht and Ben Dean reflect on the predictions shared by their expert guests throughout the season, focusing on what the future may hold for supply chains over the next three to five years. Organized around three main themes—geopolitics, emerging technologies, and how advancements in technology can enable greater flexibility, precision and efficiency in supply chains—Karl and Ben discuss topics such as nearshoring trends, the impact of automation and data visibility, and how supply chain professionals can better navigate an increasingly uncertain global environment.

Key topics discussed:

• The increasing role of geopolitics, including how trade policies and shifting alliances are influencing nearshoring and global supply chain strategies.

• The importance of technology, such as data visibility and orchestration, in building resilient and efficient supply chains.

• Predictions around shifting inventory management practices, automation, and flexible contract structures to improve supply chain execution.

• The rising focus on disaster recovery planning in response to catastrophic weather events.

Episode Transcript #

Narrator 0:00

Welcome to the Logistics Leadership Podcast brought to you by Flexe. Flexe provides Flexible Warehousing Infrastructure, helping enterprises optimize their supply chains with flexible solutions through North America's largest network of warehouse operators. Enjoy the show. It's the Logistics Leadership Podcast with Karl Siebrecht and Ben Dean.

Karl Siebrecht 0:29

Welcome to the Logistics Leadership Podcast once again, everyone. I am your host, Karl Siebrecht. Great to be with you, and as always, great to be joined by my co-host, Ben. Ben, how's it going?

Ben Dean 0:40

It's going great, Karl. We're into a new year, and I'm looking forward to more episodes with you and more great conversations with our guests. What do we have today?

Karl Siebrecht 0:49

Today, because we're into a new year, we thought this would be a great opportunity to hear from our guests, specifically the predictions they had for the future over the course of the episodes we've aired already this season. So it's a new year, why not look forward to the predictions that folks have. And it's also worth noting that we're into a new administration, and along with that, likely comes some additional uncertainty, so just makes the predictions maybe even more challenging. But nonetheless, let's summarize what we've heard from these bright minds and experienced folks throughout the season.

Ben Dean 1:26

Yeah, and these bright guests we had weren't scared at all to share their predictions for the future, up to three to five years out. So in going back through those conversations, some clear themes emerge there. I think we'll talk about three today. But Karl, before that, I wanted to tee up Bob Spieth’s conversation. Board member, supply chain veteran, leader. This guy understands what's going on in logistics, and he calls out that logistics isn't moving fast enough and that things do need to change over the upcoming years for us to service the needs of the consumer.

Karl Siebrecht 1:57

Perfect place to start. Let's give it a listen.

Bob Spieth 2:00

What has shocked me as I've gotten, you know, in my work with private equity, I'm getting a little deeper back into the 3PL world, and I'm surprised how little has changed, in many ways. You know, that many things are still the same. The supply chain world is still super fragmented. There's still a ton of manual hand offs. There's still a lot of customization. A lot of things are very, very similar to what they had then. So my first prediction would be, hey, I don't, I wouldn't expect the next three years to look massively different.

Ben Dean 2:30

So what Bob had to say there was just exactly why I'm excited to talk about this subject, and the future in general in logistics. There's so much potential that's unrealized for us to offer greater value in this space.

Karl Siebrecht 2:44

No doubt. And again, Bob with kind of his first and foremost focus and orientation around great execution and operations. It's also super interesting to hear that forward looking view from somebody who, at core, is an operator. So Ben, you had mentioned, what we've done is organizing these predictions into a few different themes. Could you just sort of lay out for us what the themes are that we're going to roll through?

Ben Dean 3:10

Absolutely and you'd already talked about the uncertainty coming with the new administration. I think that one of the top things in all supply chain leaders’ minds is what's going to happen in geopolitics over the next four years. Not just in the U.S., we've got unrest in Ukraine and in the Middle East. So everybody wants to know where that lands us. So I think we're going to hear some great things from our guests there, but we can't talk about supply chain predictions without talking about the future of technology, obviously. So our second big theme is going to revolve around that, and we've had some great guests specifically in that space. But technology, you know, in and of itself is a tool. So I think we've got a good reason to put together a separate theme, just about how the technology advancements unlock different ways of setting up supply chains, whether that's inventory management or network design, or even the commercial agreements that companies make between one another to get supply chain moving.

Karl Siebrecht 4:07

Great. So we’ve got three themes, geopolitics, technology, and how that technology contributes to making supply chains more nimble, more flexible, more dynamic. Let's kick off then with geopolitics and the impact they may have on supply chains. And we're going to start with a couple of thoughts from our guests around nearshoring, specifically. Let's give it a listen.

Mike Griffin 4:33

I mean, we have heard about nearshoring now for a year and a half, two years, right? I think in some of those cases, some of those plants have already been able to shift. But you're also seeing continued growth of companies and, you know, inbounding into the U.S. from Mexico. I think we're going to see more and more of that. You've also seen a shift because of all the supply chain struggles in Long Beach, LA, of people shifting to purchase product from other countries. And, you know, look what the growth that has happened in, you know, Houston, Savannah, heck, even Jacksonville, on the growth of the ports. And I think we're going to continue to see that and that growth of some of these other ports, because they're gonna, you know, where we get our products, is definitely going to shift.

Zac Rogers 5:28

We don't want to totally disentangle from China. That would be a terrible idea. We're the number one economy. They're number two. It's great that we are so tied in together, because the U.S.-China economic relationship really sort of guarantees peace in some ways. We're not pulling things out of China. You don't want to be too dependent on China. We clearly saw that during the pandemic. You never want to pull away away. But I think over the next three or four years, the real challenge is going to be, how do we near source and friend source things, especially because we're dealing with, yeah, we can go to Mexico, but maybe we don't have the capacity, you know, there, or maybe we don't have the just institutional tacit knowledge, you know. I mean, we don't have folks living in Honduras who've been working in an iPhone factory for 15 years like maybe we do in China. So some things will move. Some things won't, but the things that do move, that will be the big challenge, I think.

Ben Dean 6:27

All right, some great predictions off the bat there. And want to give a PSA to our listeners. That's Mike Griffin and Dr. Zac Rogers, two guests from prior episodes. Before getting to the technology portion here, these nearshoring conversations and predictions sparked me on the fact that we said geopolitical a couple times, and leading into this part of the predictions, disruption is not just geopolitical, right? There's a lot of disruption thinking about COVID in particular, that had nothing to do with politics, and that we need to, A, be prepared for, and B, be building the supply chains of the future against. Looking forward, specifically, your guest, Diane Randolph, former CIO board member, has a really great view on what companies should be doing to be prepared.

Diane Randolph 7:10

And, you know, one of the other things, because, you know, we certainly are not seeing any slowdown, in fact, sadly, an increase in, you know, catastrophic weather events. You know, one of the boards that I'm on, company lost a million square foot facility, and all the trailers that were outside of it totally destroyed in a tornado, and it was servicing a meaningful percentage of their total store fleet, and the building was leveled. Thank God no one was hurt, but trying to think through more responsive disaster recovery scenarios, right? How are you going to make up that loss in capacity, loss in service? What kind of scenario planning can you do to make sure that you're ready for that?

Ben Dean 7:55

We're hearing a lot here about the geopolitical realm changing, and that changing how we as logisticians need to plan our supply chains. I think the one commonality there is that we should expect more upheaval over the next four years or so, and that we need to have the tools in place to respond to that, either proactively or reactively, but without the tools to do something with that knowledge, there's limited ability to impact.

Karl Siebrecht 8:22

For sure. And you know, as predictions go, it's probably a pretty safe one, that it's more likely that there will be continued or more instability and uncertainty than less going forward, unfortunately. But to your point, one of the most valuable responses to that, of course, comes in the form of technology tools, which is our second theme, how technologies will further support supply chain optimization going forward. So we got a couple of insights here from a few of our guests. Let's go ahead and give that a listen.

Jeff Sexstone 8:54

Let me go through three elements. So one, capabilities. So we've gotten past a lot of disruption, and now there's an expectation for performance, so we expect to see more balance of time focused on cost to serve analytics in driving smarter, more integrated and cross functional business decisions which kind of play those out so we can get better service to customers at a lower cost point. But that requires understanding individual orders, what the cost to serve to those are at a specific location. Two, is geopolitical. We do anticipate more disruptions will likely increase for that period of time. There's gonna be a lot of whipsaws as part of that, both into high inventory, low inventory periods. That's a result, and it's how those products flow. So supply chains of the future, you're gonna be somewhat prepared for that, highly prepared for that, or not prepared at all, and depending, and this is going to the implication on some of the winners and losers in the industry, both in the 3PL side and on the shipper side. And the last part is not necessarily being the best at individual technologies. It's the best at making the technology seamless across both the services you're providing and the 3PL, the shipper, and your integrated providers and your ecosystems as well, carriers, visibility providers. That's where we're seeing more focus on the interplay, less on potentially, you know, massively cutting edge, you'll see more of that, but more time and making sure those places play well together, and probably, you know, the meaningful value, that's going to be key. So those are three things that, well, I would expect to see more in the next three years.

John Min 10:21

I'd love to see a dashboard where you're operating logistics as a 3PL, let's say. You know where every single item is, and you also know what the potential demand is going to be for those items. So you need to allocate to what part of the warehouse to be most efficient. When the truck arrives, it will have the shortest time loading it, and you can even anticipate what the demand is going to be. So you go further up the supply chain, pre-orders the goods, so you will never run out of inventory. It's all about data and data management, and I think that's going to transform the industry to be more efficient, huge gain in productivity.

Geraint John 11:04

So I think in terms of the most immediate, it's really getting much broader, but also faster visibility into shipments, product flows across complex global networks, and then being able to make rapid adjustments to routes, to modes of transportation and so on, you know, during disruptive events. So that's kind of the more immediate side. I think, longer term, we see automating a lot more of that at work and doing it more in advance of events. You know, not just in response to events once they've already happened. Of course, that's maybe difficult for us to predict and anticipate, but, you know, there's a lot of value to be had there. I also think the technology can provide a lot more granular intelligence, you know, whether that's to logistics managers or other supply chain managers, to help them understand the implications of, you know, their sourcing and network design decisions and sort of begin to make smarter choices. So it's really a mixture of kind of more automation, longer term, but also, you know, more intelligence, more augmentation of our supply chain experts, if you like.

Ben Dean 12:19

So another quick PSA for our listeners on the guests you heard from there. That was Jeff Sexstone, Partner at Kearney; Dr. John Min, Professor of Macroeconomics; and Geraint John of Zero100. I heard a lot in those conversations about data, visibility, orchestration, coordination. So surprisingly, as a warehouse guy in the past, I didn't hear things that much about a ton of structs, robots, drones. So the technology we're talking about in three to five years is really, interestingly, not interesting. It's just visibility and orchestration. I think that's why we pulled out this third theme here, and that how you use those orchestration and visibility tools determines whether you're going to improve your operations or not. It's not just a tool that you bolt on and suddenly things get more efficient.

Karl Siebrecht 13:07

That's exactly right. You know, this third theme is really connecting the technologies to execution. Execution in the physical world, which, of course, is the world that we all live in and love so much so let's give a listen to a couple of predictions around how, again, those technologies translate into the physical world.

Will O’Donnell 13:33

I think continuation of what people are doing on inventory management and inventory placement, better predictive customers can have about having the right inventory at the right place at the right time, that then leads to density delivery, that products being available and consumer wants it is a really hard problem to solve, but the benefits to everyone are massive.

Jonathan Salama 13:59

The notion of having a contract that keeps your rates as is for 12 months is going to fade away. I don't know if it's in three years or five years or more, but they were a clear reason why we did 12 months contract back in the days, like it was hard to set up those RFPs, it was very time consuming for both the shipper, the broker and the carriers. Today, they take minutes. We don't have that reasoning anymore, that it takes too long to do it and operate it. So if you knew, if you know the market's going up, but if you bid the right rate at an upper market, you lose all the freight. I think that concept is finally hitting people, and I am very hopeful that the concept of a contract, or like a raid that you have to keep for 12 months starts to fade away.

Diane Randolph 14:52

Well, I think really it's the right kind of automation from the point of view of getting the product to where it needs to go to be packed or shipped, or whatever its journey is, without a lot of human steps, human touches, room for error. And some of those have been around for a long time. You've got, you know, ASRS, you know those systems have been around. But you're seeing now, I guess maybe it's point of view of the cost coming down a little bit, or the cost of labor rising to the point where it now becomes a lot more, you know, sensible. And then really with sensors and robotics, you know, I've seen, at least in some innovation exhibits, you know, really some great tactile robots that can really do a lot with fine merchandise to try to pick it.

Ben Dean 15:46

All right, hey, we got a robot prediction in there, so my quote is filled and thank you to Will O'Donnell, Jonathan Salama and Diane Randolph for sharing those predictions with us. But I did not anticipate that we'd go this far as well, without talking about Amazon. When it comes to supply chain and logistics, they've kind of led the way for the last 20 or so years. So what's going to happen with them in the next three to five years? This may not be a theme, but Nate Skiver’s got a thought about that. Let's take a listen.

Nate Skiver 16:17

I see Amazon delivering more packages than UPS and FedEx combined. I don't think it's going to be this disruptive thing where Amazon has 30% of the package delivery market outside of their own volume, but more so their organic package volume growth. And as they, being Amazon, continue to deliver a higher percentage of that, their volume is going to grow quite a bit. And if package volume outside of Amazon in the market doesn't necessarily grow that much, or at least at the same rate, UPS and FedEx are competing with, at least right now, dozens of other carriers for that volume and so that, you know, continues to have, you know, an effect on the market of Amazon driving growth, but not really making it available, I guess, necessarily externally. Just along with that, that part of the impact, this is not just Amazon specific, but just market dynamics of continued competition is, I think UPS and FedEx will really have to diversify their business more than they are now, in addition to package delivery. Package delivery, from a pricing standpoint and capabilities, continues to be more competitive. In three years time, I think we'll see UPS and FedEx, their market share decline, not drop off a cliff, and they'll need other ways, I think, to generate revenue and provide value to retailers.

Ben Dean 17:59

I love ending on this theme of putting the technology together with execution, since Bob started us off today by talking about the need to execute. So, you know, we're talking about the future, and we're talking about bells and whistles in some cases here, but in reality, it's how you use the bells and whistles and how well you're able to orchestrate your entire supply chain, given what you can predict about the future and what you can’t.

Karl Siebrecht 18:23

That's really well said, Ben, and it triggers a thought, which is, there's one more prediction I want to include here, and it doesn't neatly fit into any of the three themes, but I think it's fundamental to what you were just talking about, and that is, what does the future look like for supply chains as a career, attracting talent. Let's give a listen here quickly to Professor Kris Ferreira.

Kris Ferreira 18:46

People are now seeing more applications to maybe cooler topics. I do think that there is more new analytical type work that's done in supply chains too, that might make it of more interest to some of our students that are leaning that way, whether it's MBA students or the lots of more folks compared to 10 years ago that are graduating with undergrads or masters in kind of like a data science or analytics area. I do see a trend a bit, although it's very recent, so I'm hoping that it continues for our MBA students to be more interested in joining companies that make stuff and get stuff to people, as opposed to kind of big tech companies, which have been the trend for a while. Obviously, you see changes in kind of the big tech industry a bit with some layoffs of larger companies under government scrutiny, this kind of stuff. And so, you know, I think because of that, there's some more interest moving back towards companies that are making physical products. I'm hopeful that there's more of a trend in labor supply this way.

Ben Dean 19:54

Well, maybe not on theme there, Karl, but I think Kris’s thoughts are very important to the enabling of everything we've talked about here. We have to have great talent in this industry to solve the challenge of the next three to five years. So, excited to see what's coming out of schools like HBS in that regard. But really great conversations, really great predictions from our guests. Thanking all of them again for going out on a limb and telling us what they think might happen in the future.

Karl Siebrecht 20:20

Yeah, no doubt. And for listeners who are listening carefully, you may have noticed that we haven't said the word AI in this entire episode. In fact, there's a lot of content around AI from our guests all season, and what we're going to do, instead of including them here in our predictions episode, we decided we would run a whole dedicated episode to AI and hear from our guests, their thoughts and their predictions about the impacts of AI. In the meantime, Ben, wonderful being with you again today and hearing from you, as always. And to our listeners, hopefully, again, you've taken away something from this episode that is a new thought, a new idea, and something you can build on. Let's keep the conversation going.

Narrator 21:07

You've been listening to the Logistics Leadership Podcast presented by Flexe. The opinions of the guests aren't necessarily the views of their company. If you'd like to learn more about the podcast or join the Logistics Leadership community, check out this episode's show notes and visit flexe.com/logisticsleadershippodcast. Keep the conversation going. Email us at leadershippodcast@flexe.com. The Logistics Leadership Podcast features original music by Dyaphonic. The show is produced by Robert Haskitt with Jeff Sullivan, Ben Dean, and Karl Siebrecht. Thanks for joining us.